It's a statement no one in Michigan has had the joy of uttering in a decade, but it's true: The state has money. More money than lawmakers and economists thought it would.Eight months after the May 2011 revenue estimating conference, the state coffers hold $434 million more than the Lansing lawmakers and analysts predicted, said John Nixon, the Director of the State Budget Office. However, this is less than half of the amount of the fantastic figures that have been tossed around in the past few months because much of the balance already was committed, he said. .
The majority of the unattached money, $230 million, is the result of more revenue being pulled in to the state through income and business taxes.
The Senate Fiscal Agency in its December 2011 analysis also found that the state pulled in more revenue than was estimated in May 2011, although it places the figure at about $261 million. This is broken down into $148 million in the general fund and $113 in the School Aid Fund.
Most of these increases are attributable to increased employment and increased wages, and thus, increased income taxes, the Senate Fiscal Agency found. Michigan's unemployment rate dropped below 10 percent at the end of 2011, the first time it has slipped under that benchmark since the recession deepened in 2008. Higher gasoline prices in 2011, and therefore higher gasoline taxes, also contributed to the increase in state revenue.
Nixon said corporate income taxes made up a large portion of the revenue increase. He said he anticipates this number will continue to rise as the Michigan Business Tax is entirely phased out in favor of the flat, 6 percent corporate income tax passed into law in May 2011.
"We hope it'll be stronger, because the businesses will have a stable tax that they'll be able to count on," he said.
In addition to this unanticipated revenue, the state enjoyed an actual budget surplus during 2011; that is, lawmakers appropriated more funds to state departments than those departments actually needed. When the dollars are unused, agencies turn what is called the lapsed money back in to the state, resulting this year in a $204 million bump, Nixon said.
Unlike a revenue surplus, however, this money only comes in once. It is not a sign of better economic times ahead or a dollar amount to be relied upon in the coming fiscal year. It's a one-time bonus.
Neither of these numbers is set in stone just yet, Nixon said, but they are incredibly close to accurate. State administrators will meet Jan. 13 in Lansing for a revenue estimating conference, and there will solidify these figures in addition to calculating next year's revenue.
"Those numbers may change a little bit here and there, but you're looking at somewhere south of $500 million," he said.
How lawmakers choose to spend or save the extra millions remains to be decided, Nixon said.
"We'll identify the one-time needs and the ongoing needs and allocate it the best we can," he said. "Once we get our revenue numbers in we'll be able to look at that."
But previous discussion of the surplus makes reasonable to hypothesize some of the money might be committed to cover the recent Michigan Supreme Court ruling against a small portion of the Gov. Rick Snyder-championed end to the income tax exemption for seniors. This ruling left a budget hole of about $60 million. Many of the remaining dollars could be destined to beef up the Budget Stabilization Fund, commonly known as the Rainy Day Fund, which dwindled from about $1.2 billion in FY 1999-2000 to only $2.2 million today.
Whatever the fate of last year's spare $434 million, the cheery financial news does not end with 2011. The Senate Fiscal Agency expects the Michigan economy, as gauged by inflation-adjusted personal income, to grow 0.3 percent in 2012, 0.8 percent in 2013 and 3 percent in 2014. Wage and salaried employment also are expected to continue their positive climb after growing 1.7 percent in 2011, the first increase since 2000.
The Michigan budget is expected to grow as well. According to Senate Fiscal Agency estimates, the final fiscal year 2010-11 revenue totaled $20.1 billion, an 8.6 percent increase from FY 2009-10. This is the largest growth in combined general fund and School Aid Fund revenue since FY 1984-85, excluding the increases directly associated with Proposal A in 1994.
Revenue in FY 2011-12 is predicted to grow at a slower rate, totaling $19.8 billion. Although this is slightly below the FY 2010-11 revenue, it is $393.1 million more than was predicted in May 2011.
Looking at the budget as a whole - including the general fund, the School Aid Fund and various federal dollars - Nixon said he estimates next year's budget total will match or slightly improve on this year's $47 billion.
"We've hit the bottom," he said. "I think that there will be growth, (but) we know it's going to be much slower growth."